TMI Blog2007 (10) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... GARODIA., MS. SUSHMA CHOWLA. ORDER-A.K. Garodia, A.M.: This is a Revenue's appeal directed against the order of learned CIT (A)-XV, Mumbai dt 31st July, 2003 for asst. yr. 2001-02. 2. The Revenue has raised only one effective ground, which reads as under : 1. On the facts and circumstances of the case and in law, learned CIT(A) erred in directing the advertisement expenditure without appreciating that the same was incurred in respect of ongoing projects and are not relatable to the completed projects. 1b. While doing so, learned CIT (A) failed to appreciate that the said expenditure was required to be capitalized and could not be allowed as a deduction even going by the assessee's method of accounting. 3. Briefly stated, the facts are that the assessee is a builder and developer. The assessee firm has shown income of Rs. 16.08 lakhs from its completed project of Panchavati Gardens. It is noted by the AO from the P L a/c of the assessee that an amount of Rs. 14,27,377 has been debited to the P L a/c towards advertisement and exhibition charges. The assessee was asked by the AO to explain why this expense of Rs. 14,27,377 should not be disallowed as these are not rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for new project and hence, the same should be capitalized. 5. As against this, learned Authorised Representative of the assessee supported the order of learned CIT(A) and filed a paper book containing 126 pages having details of expenses along with copy of advertisement bills and copy of advertisements in newspapers. Our attention was drawn to page No. 7 of the paper book, which contains debit note of Rs. 9,87,092. It was also submitted that this amount of Rs. 9.87 lakhs is out of several bills. Our attention was drawn to page No. 8 of the paper book, which is a bill for Rs. 4,26,298 out of which, Rs. 1,70,520 has been transferred to the assessee firm by way of debit note appearing on page No. 7 of the paper book. It is submitted that this bill of Rs. 4.26 lakhs is on account of advertisement on 24th Jan., 2001 in three newspapers i.e. Times of India, Bharat Times and Baharat Samachar. It is submitted that photocopy of these newspaper cuttings is appearing on page Nos. 9, 10 and 11 of the paper book. It is pointed out that in these newspapers, advertisement was made for five projects of Dynamix group out of which, two projects are of the assessee i.e. Millennium Gardens at Malad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal rendered in the case of Wall Street Construction Ltd. v. Jt. CIT [2006] 102 TTJ (Mumbai)(SB) 505 : [2006] 101 1TD 156 (Mumbai)(SB). It is submitted that in this judgment of the Special Bench of the Tribunal, reliance was placed by the assessee on AS-7 issued by the Institute of Chartered Accountants of India, which has been referred to by the Special Bench in para No. 6 of the judgment and as per the same, example of cost that relates directly to a specific contract does not include expenses like advertisement; and hence, as per this judgment of the Special Bench, advertisement expenses cannot be capitalized because in the present case, advertisement expenses are not referable to a particular project. Reliance was placed on the Tribunal judgment rendered in the case of Paranjpe Griha Nirman (P.) Ltd. v. Jt. CIT, ITA No. 2298/Mum/2001, dt. 4th April, 2006; copy of which is available on page Nos. 2 to 6 of the paper book. Our attention was drawn to para No. 5 of this Tribunal judgment, as per which, it was held by the Tribunal that the lower authorities have erred in not allowing the expenditure of Rs. 28,43,639 as a deduction in computing the taxable income of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of this factual position, we feel that the advertisement expenditure incurred by the assessee is directly relatable to the individual project because, if 2/5th of the total expenditure is allocated to the assessee on the basis that out of advertisement for five projects, two projects were belonging to the assessee, then the expenses borne by the assessee can be allocated to the individual project also and 50 per cent of the expenses is relatable to the Millennium Gardens project and balance 50 per cent is relatable to Madhuban project. Regarding other administrative expenses such as conveyance, general charges, legal fees, printing and stationery, salary, employer's contribution to PF, telephone charges etc., we find that there is no basis on which these expenses can be allocated between these two projects of the assessee firm and hence, advertisement expenses stand on different footing as compared to these administrative expenses because these administrative expenses cannot be allocated to individual project on any rational basis. Whereas, advertisement expense is found to be allocable to individual project on the same basis as per which, these expenses were allocated b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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